Stop Chasing Hype: The Unsexy Reality of Long-Term Investing

25:51Stephen:You mean months.

25:56Andrew:There are years Warren Buffett underperformed the S &P 500 and he's still the most successful investor of all time. He pulled it off. So you're good. It's okay. Stop stressing out about it. If you underperformed the S &P 500, bro.

26:14Stephen:Yeah, thank you.

26:19Andrew:That's a little inside joke because Andrew really does stress about it. And that's, I know it's because he is such a professional. And he knows that we're all investing in this and he wants to not screw us over, basically.

26:39Andrew:But I totally respect it. But at the same time, you know, myself or other partner, like, we both understand, like, this is not an exact science. And just like all our clients understand, this is not an exact science. It's okay that we go down sometimes. And don't beat yourself up, buddy. It's okay.

27:06Stephen:I appreciate that.

27:09Andrew:Just for you.

27:10Stephen:Yep. All right. One I want to throw out there, which is not fun to talk about, and it doesn't make for great content, but it is a key part of investing and that is portfolio management. You have to be diversified and you have to make sure that that's always a part of your portfolio if you want to succeed over the long time. We always talk about Warren Buffett. One of the under talk things about his greatness is how long he did it. You can always look at investors who are flashing the pan. They might be on CNBC one year and then from three years later, you never hear of this person ever again. But a few select few investors have been able to stand the test of time.

27:56That's because they've realized that surviving is the utmost importance when it comes to investing. Diversification is a quick, easy way to do that.

28:08Stephen:And keep a lot of the other biases in check as well. overconfidence or research mistakes, all of the things that can plague investors, a lot of it can be solved through diversification. And it certainly makes for a smoother ride for your portfolio. And it also gives you the freedom to not take like superhero moves all the time. When you have a diversified portfolio, you can, for example, step away for six months and come back and not feel like you have to completely re-transform the entire portfolio tomorrow. A good diversified portfolio that you've built over time can stand there and you can just, I can't use the word tinker because we used that earlier in the episode, but you can smooth out the edges of your portfolio over time and just make those little step-by-step improvements and uh over let's say like a five-year period you could completely transform your portfolio but by being diversified you can do that over time rather than having the stress of like how do i deploy all of this capital now just diversify and and and let let yourself work into

29:26Andrew:that over time yeah i remember we were talking to somebody and they i want to say i don't remember how many, but they own, I want to say around 35 stocks. And they were talking about like, this is just stressful. I want to sell them all and start over. And you're like, ceasefire. Hold on. Let's not do that. We're not going nuclear option here. We're just going to make a plan, smooth it out over time, like you said. 100%. That is very important. So to the brand new investor, maybe they've bought their first stock or maybe they haven't even pulled the trigger yet and bought their first stock yet.

30:11Andrew:And they hear you start talking about diversification and they suddenly panic. And does that mean they need to have a plan to where they get into like, you know, five or six stocks all at the front? how do you diversify or ensure you're diversifying from day one to year five does that make sense

30:37Stephen:yes it does so it depends on what you're investing if you're just starting out from scratch and you're like hey i'm just trying to do 100 bucks a month and you're starting from zero and you're doing 100 100 100 then you can just build up over time just build one stock one stock one stock once you get to like year two you've got 20-25 positions you're solid there you're 100 % diversified at that point if you're if you have a pile of money maybe it's like a life savings or a retirement account or inheritance or things like that then yeah you probably do want to diversify that all at once and I would I would look at index funds ETFs things that give you exposure to the entire market.

31:26And then if you think, you know, I want to try stock picking,

31:29Stephen:you can start to pick pieces off of your nest egg and start to be a little more risk on with that money. But that's how I would, I would try to think about if it was a brother or a sister or whoever, that's what I would tell them. And also we, we, I don't remember what the episode is called i'll look it up here in a second but uh we we did a great episode with a guest who really

31:59Andrew:broke down the bond market really well um which is also another great option uh if you're in that position where you have a just a giant stack of of your 401k money or whatever that you need to diversify that's a another safe safer route you can go as well yes so my next one is it seems like common sense but it freaks people out and that is a market crash is a feature not a bug um the market goes down and when it goes down that's okay investors make a lot of money when the markets go down because that means their their dollar buys a lot more in the market now i understand uh we aren't the you know merrill lynch's or the uh goldman sachs uh of investors and we don't have unlimited funds you know that you know when when grocery the grocery bill gets tight you you suddenly feel that that market crash a lot harder than i guess the average person would but it's okay don't freak out you know even if you do have to lighten up on how much you invest because of inflation or ridiculously high grocery prices you know how much it costs just for me and

33:28Stephen:katie to buy groceries every week yeah but you guys buy healthy stuff so so that's expensive dude i'm out there buying like ramen noodles and like i can make a budget work you're not in college anymore bro do ramen noodles and chicken breast good macros hey don't knock it till you try it uh bro like you slice up dice up the chicken breasts and season them up all nice and then throw that in with your ramen noodles. I'm telling you.

34:06Andrew:There are a few things that the military absolutely ruined for me. Peanut butter is one. I will never eat another drop of peanut butter again the rest of my life. That's so sad. Ramen noodles. My wife loves ramen noodles, and I refuse to just, like, obviously she wins, but I put up a fight. Like, hey, those are disgusting. They are so bad for you. Here, let me show you this video of how it's made. And she doesn't listen. And of course she wins because, well, she wins. But no, ramen noodles, gross. Nope, won't touch them. Anyway.

34:50Stephen:That's too bad. That's a love language on this side of the fence.

34:56Andrew:But yeah, no, we spend about$170 a week just for the two of us. And we do buy healthy food, but we try to be smart about it. You know, we do a lot of shopping at Aldi, things like that. Yeah. Just because it's too expensive to shop at Kroger. But yeah, so I mean, even if you got to tighten up a little bit, that's fine. But don't freak out just because the market's gone down. invest, keep investing. That is the perfect time to invest. And I mean, I don't know if you disagree, Andrew, but you're going to see a lot faster return. I think investing when the market goes down versus when it's just going crazy like it is right now.

35:43Stephen:Another one that nobody wants to admit is you're going to be wrong as an investor a lot. I tried to think about what could be a fun way to kind of explain how investing kind of, it's just frustrating, right? I come from an engineering background, so I'm used to reverse engineering things and having a solid answer. And it's like, you know exactly what the answer is going to be. Did you ever used to play roller coaster tycoon no no okay never mind then that that would land completely flat but just when you buy stocks you just don't know what you don't know and and really like there's just no guarantees for anything uh you could look at any company and the ones that seem to have everything going for them and then one little thing could happen and it changes everything could be anything from a a CEO who does something unpredictable, employees who do something unpredictable, customers suddenly find something that they don't like about something.

36:54Stephen:It could be a lot of different things. And so because that's going to be the reality of investing, we have to do all of the things that we talk about on our show constantly. Things like fighting against your biases, is things like buying when the market's down, like you said, things like doing your research and things like having a diversified portfolio. You want to put as many good stocks in your portfolio as you can and then just be okay with the fact that some of them aren't going to work out and you have to sometimes rip the band-aid off and move on. But if you keep a portfolio and you keep a portfolio mindset and don't beat yourself up over, man, I thought Starbucks was going to be the next Rocky story, and they're not.

37:44Stephen:You just move forward and realize that there's other opportunities and you don't have to predict 100 % certainty how you're going to make your money. That's one of the weird things about the way I invest personally because it's so numbers-driven. I have no idea which stock is going to pop off, and it's hard and every year there's a different one that pops off but there will be a stock that pops off if you're doing a good job and that's how the portfolio has been and so it's been it would be a fun chart to follow like how certain stocks pop off and then they stay flat and another one pop off and stay flat and then you get another stock to rip up higher after that so that's just the nature of investing and we just have to get used to it yeah that's also not easy to do um like for me that that stock was under armor okay i thought under armor was like

38:48Andrew:gonna take over the industry like destroy nike really and yeah yeah that didn't happen was that when steph curry signed with them did stuff he did yeah that's so unfortunate because

39:02Stephen:that that was like a big turning seemed like a turning point for them yeah yeah it just it

39:09Andrew:never happened and it's unfortunate i love their product i'm a big steph curry fan yeah um and i really wanted to see them just dominate but and they did for a minute but then And, yeah, they just kind of sank down a little bit, and they're just sitting where they sit. So that was my big one that I just thought was going to be crazy. And, boy, was I wrong.

39:42Andrew:All right. So my last one, it's hard to pick. Man, it's hard to pick. I guess I guess so it's the ultimate unsexy at least for me because I hate it and even in doing podcast show prep I still hate it and that is reading 10Ks is mandatory and there is no shortcut to it and I can tell you the single most I would rather I do Dude, there is a laundry list of things I would rather do that are incredibly unpleasant, including eat ramen noodles with peanut butter mixed in it.

40:29Stephen:Oh, wow.

40:31Andrew:Than read a freaking 10K, bro. Like, oh, it's so dry and dry. Like, I don't get how Warren Buffett thought it was entertaining. I mean, he's done it since he was 11. He had to find something entertaining about it. I don't know. But, man, it sucks. I really hate it. But, you know, I want to be successful as an investor. I want to be successful, you know, providing a healthy and safe financially future for my wife and my family. So, therefore, it's just one of those things you've got to bite your teeth and go do even though you don't want to, even though you don't like to do it. You've got to read 10Ks and there's no shortcuts.

41:20Stephen:I, I, I, um, I relate with what you're saying. Like I love reading 10 Ks, but I still have to like, it's still a very hard thing to do. It's like, it's like saying you go to the gym and you love bench pressing. Even people who love bench pressing, you have to get yourself in that mindset of like, this is going to be really hard and I'm going to exert a lot of energy. That's how I feel when it comes to writing a 10 K. I mean, writing. Yeah, that would be hard. reading the 10k um i gotta have like a cup of coffee or a cup of deca like sipping on something i gotta be everything has to be prepped just right because it is it's hard it's it's uh takes takes a lot out of you and i don't know how buffett does it like eight hours a day i have to mix in like earnings calls or podcasts uh you know fiscal fiscal ai i have to look at some numbers It is hard, but I would say it does get easier, though.

42:20Once you've read a 10K of a company, you know so much more about that business.

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44:50Andrew:It does. That's a really good point. And I will say, especially seeing how I came into working in this company with you guys and not knowing much of anything about value investing, long-term investing, pretty next to nothing, really. And I have learned so much. And I remember, you know, a couple of years ago, you're like, Stephen, you got to read the 10K. I'm like, no. And, but I mean, since I've started doing it, it's, I've learned so much. And it's daunting, I would say, especially if you're a beginner, it's daunting because they're talking about crap and you have no idea what any of it means.

45:44Andrew:and not and that's the other super annoying thing is there's no like standardized like way to do it so you know in prepping for our next podcast episode we're gonna do i was looking at 10ks for for similar companies and they're just completely out of order compared to each other so frustrating bro because i look at the first one i'm like oh this is the information i need cool go to the next one you're like it's not there where is it so then i'm frantically scrolling control effing like where are you so irritating but you don't get distracted by by how daunting it is um you're not going to understand everything they're talking about and that's okay it's just the more you do it the more you'll understand i know that seems kind of crazy but definitely the more the more 10ks you read you'll it'll stop looking like greek

46:53Stephen:and actually start making sense yeah that's good stuff for sure have have we uh

47:05Stephen:belagably beleagored belabored have we belabored the point of being patient and this being a long

47:12Andrew:term game or can i make that my last one no i think i don't think you can ever overstate the importance of being patient.

47:22Stephen:Okay. Well, my last unsexy truth is one that is frustrating to me and I'm sure to lots of us because we want to get results quickly. And that applies for so many things, but especially investing. You could be the very best investor in the entire world. You could be Warren Buffett and you still have to play by the rules of compounding and letting stuff multiply over time. And we're talking about years and decades, which is such a crazy idea. I remember when I first started investing in the stock market, it's like I was a different person back then. This was 2012, 2013. The world was completely different.

48:07Stephen:And you think about what kind of returns are you supposed to get over a 10-year period? You had maybe your portfolio triples, maybe, like if you really picked really good stocks. So it's a slow process. It's not like doing a sports betting and like hitting a parlay and you've quadrupled your money or whatever. This is a very, very long time to make money. But what's great about it is it might feel slow, but it's steady. If you do it in the right way, you're building these steps and they're little steps towards your wealth. But they're steps that grow exponentially. And that is the beauty. Like I know gambling is like one of those hot topics right now with Calci and Polymarket and everybody just seems to be gambling.

49:04Stephen:There's like an allure to that. But what's hard about those ways of trying to make money is you get wiped out instantly. You just get wiped out. With stock market, with stocks, with investing, even when you're wrong, a lot of times you're still getting your money back, depending on what market we're in. But you're getting your money back, or maybe you're just losing 10 % or 20%. It's not like an instant, oh my goodness, I've lost everything, I have to start over. So that's the beauty of the stock market. and that should hopefully take a lot of the pressure off and hopefully help us all to enjoy the process.

49:42Stephen:I don't think any of us want to be working investment banker hours and never having time for any hobbies or anything fun and just feeling like you've got to grind through 10Ks for 10 years in a cave. That's not necessarily what you need to do, and it might not even help you get to true sustained success in the stock market. So take some comfort, take some inspiration and some of the constraints of the stock market, the fact it's a long-term game, and use that to your advantage. Use it to enjoy the process. Use it to take your time and find the fun parts and try to look at the glass more half full.

50:24Stephen:I know it's so hard to hyper-focus on, man, if I hit this number or man, if I hit that number. But it's just a number at the end of the day and then we're we're living and doing things and that's really what's more important so try to keep that in mind and and just roll with the fact that it's going to take a long time yeah that's such a great uh close can i can i get on a soapbox for a second yeah because because this is one of my ultimate or so one i have two but this this is the second of my

51:01Andrew:ultimate pet peeves it is and you got you and evan i think did a aar episode a while back about or maybe it's evan and dave i don't remember but chasing the numbers um and the bank account and yeah social media tv you know hollywood all this stuff is designed to make you chase that that instant get rich and we hear about all these amazing success stories like uh canva you know canva came out of nowhere dude like it was one day it was adobe and then there's canva like who is canva where'd it come from but but and to the outside looking in it appears that canva was an overnight success but that's actually not true it took her like 10 years or not quite 10 i think it was like seven years six seven years to actually get the funding and get canva off the ground it was far from an overnight success it was a slog it was a straight up you know fight in a ring like it was and she just but because we we don't celebrate that i guess i don't know i don't know the right way to put it it's just dude and it's hard to ignore because it's so in our face all the time um but you just got to look past the the instant successes and there are some that are out there there are some day traders that make you know 10 million dollars in a day good for them um they are a very very unique case very unique like 0.0001 unique um and so that's okay it's okay that the rest of us it's going to take you know 20 years to to build wealth in the market in my opinion that's that's even better because we'll know how to manage it because we've managed it all the way up to that point so we're learning as we go rather than getting a whole bunch of wealth and all of a sudden you're like what do i do with it so that's my soapbox i'm done

53:17Stephen:there's so much wisdom there i like the last point you made too especially like if if how how do you make your money and then it's like oh how else are you gonna manage like if i uh bought a lottery ticket and hit it rich like well am i gonna do all this money what did i do before that was successful you know it's just like a dangerous path that people could go down so i like how you're thinking ahead about like what happens when i get there

53:46Andrew:well and it is and statistically speaking just you brought up the lottery using those statistics i think it's something like 80 85 percent of big payout winners end up bankrupt in like five years yeah and don't quote me exactly on those numbers but it's it's staggering it's a lot yeah and the The only thing you can really point to is they didn't know how to manage their wealth. And you have all these, well, let me help you invest. Let me help you do this. This is a good tax shelter. What's a tax shelter? I don't know. I've been a 401k employee my entire life. I've never even had to think about a tax shelter.

54:30Andrew:Like all this stuff. And you have all these people trying to take advantage of you. You suddenly have family you didn't even know you had in like Kosovo. like it's just like i'm not even from kosovo but it's just it's one of those things man would winning the lottery be awesome sure i guess but i am 100 and this is no lie this is not just because i'm on the podcast right now you can you can ask my wife my dad like my dog i am 100 okay just sitting here fighting the fight and building my wealth organically naturally and learning how to manage it as i build it and going from there

55:18Stephen:send all your lottery tickets my way just in case you hit one

55:23Andrew:i'll take care for you i have bought one lottery ticket in my entire life and it was because the person in front of me at the gas station you had to pay cash you couldn't use a card and they didn't know that and so they didn't have any cash and the person had already printed it out and i guess like when you already print a ticket out there's like a whole big like process chain of custody thing you have to do for the ticket and so um she printed it out the person didn't buy it and i got up there she's like hey you want to buy this it's two dollars cash if you have it and she told me she's like it's just a lot of work for me if you don't if someone doesn't buy it i'm like yeah sure i got two bucks so that's the only lottery ticket i ever bought in my life

56:12Stephen:and it was just to be nice to someone that didn't make anything back i don't i don't think so i

56:19Andrew:Honestly, I don't even know if I checked. To be honest, I don't remember. Like, I remember, like, the buying it and stuff, but I don't remember actually looking at the numbers and checking. I'm sure I did, but I don't remember.

56:36Stephen:Let's not know that answer. You might not like it. Yeah, for reals.

56:43Andrew:But, all right, that's going to wrap it up for this episode of Investing for Beginners, everybody. Thank you so much. Let us know in the comments if we missed the unsexy truth that you hold near and dear to your heart. We'd love to hear from you. Just drop it in the comments below, whatever platform you're on. And we will see you all next time. In the meantime, though, never, ever forget, invest with a margin of safety. Emphasis on the safety. Goodbye.

57:18Stephen:You've been listening to the Investing for Beginners podcast. All show notes can be found on our website at einvestingforbeginners.com. To master the basics of stocks in seven days, sign up for our free email series at einvestingforbeginners.com slash newsletter. Until next time, have a wonderful day. The information contained is for general information and educational purposes only. It is not intended as a substitute for legal, commercial, and or financial advice from a licensed professional. The hosts may own positions in the securities discussed. Review our full disclaimer at einvestingforbeginners.com.

58:29Stephen:We'll see you next time. apps today in app or at order.sweetgreen.com. Available at participating locations only. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop. With Mint, you can get premium wireless for just$15 a month. Of course, if you enjoy overpaying, no judgments, but that's weird. Okay, one judgment. Anyway, give it a try at mintmobile.com slash switch.

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